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Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsDetermination of Income and Employment4 Marks
Question
Given consumption function C = 100 + 0.75 Y (where C = consumption expenditure and Y = national income) and investment expenditure Rs. 1000, calculate:
  1. Equilibrium level of national income.
  2. Consumption expenditure at equilibrium level of national income.
✓

Answer

  1. Y = C + I At equilibrium I

Y =100 + 0.75Y + 1000

0.25Y = 1100

Y = 4400 This is equilibrium level of income.

  1. $\text{C} = 100 + (0.75\times4400)$

$= 100 + 3300$

$= 3400.$

Alternate Answer

Y = C + I

4400 = C + 1000

C = 3400.

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